Mortgage Walkers and Jingle Mail
Jingle mail is the newly popular term used to describe situations where a homeowner mails their house keys to the mortgage lender, stops making mortgage payments and walks away from the home. However, this is an extreme situation with serious consequences.
Mortgage “Walkers” who abandon their home are almost guaranteed to damage their credit report and credit score for several years. A foreclosure will show on the report for 7 years. Missed loan payments will also bring down their credit score, though it may rebound within a couple years if they don’t miss payments on any other loans.
If the lender forecloses on a home and sells it for less than what it owed them, in many states the lender has the right to pursue the mortgage holder to pay them the balance of the loan, called a deficiency judgment.
California and some other states are notable exceptions.
California has non-recourse laws which provide that a lender cannot come after the homeowner for additional money if a foreclosed home sells for less than the amount of the mortgage. The California law permits this only if it’s the first mortgage that hasn’t been refinanced.
In addition, some remedies, designed to help restructure the loan, allow the homeowner to keep the home and avoid foreclosure, are only available to homeowners who are still living in their home.
As mentioned earlier in most cases, once a homebuyer splits, the mortgage lenders are stuck with the loss. Americans have long been able to cut their losses from bad investments and start over. It stands to reason that when the market made houses into yet another speculative investment, Americans would do the same.
Borrowers acted rationally in response to market forces and incentives during the bubble: Buy a house because prices always go up; you can’t lose.
Many are acting rationally now: Mail the keys back and un-borrow the money, because prices are sinking fast while the debt isn’t.
SOURCE – The Rise of the Mortgage Walkers by Nicole Gelinas AND
Walking Away from Property and Your Mortgage by Jennifer E. King for lawyers.com